Coinbase closes at record low as Mizuho warns on revenue

[NEW YORK] Shares of Coinbase Global closed at their lowest ever amid a broad-market tumble and a fresh warning from Mizuho Securities about the potential of a revenue miss in the first quarter.

The largest US cryptocurrency trading platform fell 3.1 per cent to US$185.63 on Tuesday (Jan 25). After the 3-day decline, shares are down nearly 50 per cent from a November peak. The stock debuted on the Nasdaq in April.

"Renewed signs of a 'crypto desert', alongside trading-fee compression, make Coinbase stock especially unattractive heading into the first half of the year," said Dan Dolev, senior fintech analyst at Mizuho, who cut his price target to US$220 from US$300 on the stock. With crypto prices plunging, his team is closely watching for any signs that may suggest retail investors are pulling out.

"Just from a psychological perspective, there's the possibility that a lot of crypto investors would say I am cutting my loss once they see Bitcoin approach their break-even point," he said.

Coinbase generates the majority of its revenue from trading fees, and its shares often almost perfectly match moves in Bitcoin. Yet, trading volumes are subdued quarter to date and the platform continues to face pressure to reduce its fees to remain competitive, Dolev said.

As a result, the bank cut its first-quarter revenue estimate for Coinbase to US$1.4 billion, lower than the consensus of US$1.8 billion among Wall Street analysts.

Piper Sandler analysts, led by Richard Repetto, said Coinbase's recent pullback offers "an attractive entry point" to the growing cryptocurrency and digital asset space. Mainstream adoption of digital assets remains strong and Coinbase is likely to be the "on-ramp" for all things crypto, they wrote in a report on Tuesday.

Increasing institutional participation, however, is not a positive factor for Coinbase because they pay a fraction of the fees retail investors pay, risking a "bigger drag" on the take rate, Doley said.

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